Billionaires Vs. American Workers

The Pitch: Economic Update for August 15th, 2024

Friends,

On Monday, Elon Musk hosted an interview with presidential candidate Donald Trump on the platform X, which he bought back in 2022 when it was known as Twitter. At one point, Trump bragged about negotiating a better price for an Air Force One upgrade when he was in office, and Musk took that opportunity to call for an efficiency commission to make sure that the government isn’t overpaying for products and services. “I’d be happy to help out on such a commission,” Musk volunteered.

“Well, you, you’re the greatest cutter,” Trump replied. “I mean, I look at what you do. You walk in and you just say, ‘you want to quit?’”

“They go on strike,” Trump continued as Musk laughed. “I won’t mention the name of the company, but they go on strike and you say, ‘that’s okay. You’re all gone. You’re all gone. Every one of you is gone.’ And you are the greatest. You would be very good. Oh, you would love it.”

Workers who organize and strike are protected by federal law, and that law is enforced by the National Labor Relations Board (an organization which, probably not coincidentally, Musk is currently suing to dissolve.) That’s why, on the morning after the interview, the United Auto Workers filed federal charges with the NLRB against Musk and Trump for unlawfully intimidating Tesla, Twitter, and SpaceX workers.

It’s worth mentioning that the story Trump told on the livestream didn’t actually happen. None of Musk’s American employees have ever gone on strike and been fired, as Trump described. Instead, Trump just told a fairy tale about what he thinks a strong CEO should do, and Musk agreed with him.

But even though it was a total fabrication, Trump’s story could have real-world consequences. Tom Krisher at the Associated Press talked to University of Michigan law professor Sanjukta Paul, who argued that the comments on the live feed could “chill” Musk’s workers into not taking action because Musk and Trump were “approvingly describing” and “wholeheartedly commending the blatant violation of our main federal labor statute,” which “would constitute interference with protected rights.”

Let’s set aside the legal particulars for a moment. I know we live in interesting times, but it’s still jarring that a candidate for the presidency of the United States broadcasted to a live audience of hundreds of thousands of listeners that he admired the richest man in the world’s eagerness to illegally fire workers when they call for better wages and improved working conditions.

You have to reach all the way back to President Reagan firing over 11,000 striking air traffic controllers in 1981 to find an overt anti-worker political action like this. I’m used to decoding stealthy trickle-down tactics arguments for slashing wages and laying off workers in order to profit the wealthy business class. But in this case, Trump just said it out loud, in the most bald-faced trickle-down admission made by a party’s leading candidate since Mitt Romney was caught on tape at a high-dollar fundraiser calling 47 percent of all Americans “takers who believe that they are victims, who believe the government has a responsibility to care for them.”

This, I would argue, goes much further than Romney’s comments — and not just because Romney believed his comments were private. In front of an international audience, two billionaires openly celebrated and praised the mass firing of workers who are legally protesting unfair working conditions, implying that larger paychecks and better working conditions are an inconvenience to be overcome. These trickle-downers laid it out in language that is just about as plain-spoken as it gets.

Luckily, UAW President Shawn Fain is pretty great at plain-spoken statements of his own. In the press release announcing the UAW’s complaint to the NLRB, Fain said, “When we say Donald Trump is a scab, this is what we mean. When we say Trump stands against everything our union stands for, this is what we mean.”

Fain continued, “Donald Trump will always side against workers standing up for themselves, and he will always side with billionaires like Elon Musk, who is contributing $45 million a month to a Super PAC to get him elected. Both Trump and Musk want working class people to sit down and shut up, and they laugh about it openly. It’s disgusting, illegal, and totally predictable from these two clowns.”

Surely some pundits are busy clutching their pearls at the rough language in Fain’s statement, but I disagree. This is exactly the kind of treatment you deserve when you joke around about cutting the paychecks of American workers to enrich the wealthy few.

The Latest Economic News and Updates

A Great Inflation Report Indicates Price Hikes Have Cooled…

“Inflation extended a run of cooler readings in July, sealing the case for the Federal Reserve to cut interest rates at its meeting next month,” write Sam Goldfarb and Nick Timiraos at the Wall Street Journal.

“The consumer-price index rose 2.9% from a year earlier,” which makes it “the lowest reading since 2021 and slightly below economists’ expectations of 3%. Core inflation, which excludes volatile food and energy items, was 3.2%, also a three-year low,” the WSJ reports.

Jeanna Smialek at the New York Times explains that the 3.2% core inflation rate was important because it is “a step down from the previous report and in line with expectations. Economists pay attention to that number because it gives a sense of the underlying inflation trend,” she writes.

“Average hourly earnings, adjusted for inflation, have risen 0.7 percent over the past year, and 0.8 percent for rank-and-file workers,” the Times’s Ben Casselman adds. “Nominal wages (that is, not adjusted for inflation) are rising more slowly than in the red-hot period coming out of the pandemic, but slower price increases mean that, in real terms, many workers are actually better off now than they were back then.”

Rachel Siegel at the Washington Post adds that the Federal Reserve is more likely than ever to lower interest rates when they meet next month. “That would mean some breathing room for households and businesses trying to get mortgages or auto loans, or grow their businesses,” Siegel writes. “For two years, high interest rates have been an added strain for those also struggling under the weight of high prices, especially for basics like food and gas. Now, more relief is in sight — even though the run-up in inflation means prices are still significantly higher now than they were just a few years ago.”

There is one sector where prices remain stubbornly high. “Housing continued to dominate the inflation snapshot, with shelter costs accounting for nearly 90 percent of the monthly increase. Rent costs have been cooling for some time now, but economists are still puzzled about why that shift didn’t show up in official statistics until this summer,” Siegel writes. “July saw a slight backpedal, with a key rent gauge rising a smidgen more than in previous months. (The widespread expectation is inflation won’t come down all the way to normal until there’s major headway on the housing component.)”

The best way to make fast headway on housing prices is to bring down interest rates, which would make mortgages less expensive. So now, all eyes are on the Federal Reserve as they consider their next move in September.

…But Americans Still Aren’t Feeling the Lower Inflation

Just because the inflation rate is cooling, that doesn’t mean that prices have declined. For Time, Simmone Shah talked with Associate Professor Willaim Hauk of the Department of Economics at the University of South Carolina, and he explained that “If inflation goes down, it means that the rate at which prices increase is slowing down, but it generally is not going to mean that prices are going down.” This weeks’ inflation report simply means that prices aren’t increasing at the speed that they were two years ago.

The New York Times published a piece declaring higher food prices to be the biggest daily hardship for most Americans.

And while that huge increase in prices during 2022 and 2023 has stuck around, the good news is that “Several economists said they expected to see grocery inflation remain around current rates in the coming months, barring unforeseen shocks,’ reports Madeleine Ngo. “The Agriculture Department has predicted that prices for ‘food at home’ would rise 1 percent in 2024, down from 5 percent last year.”

Shockingly, though, the Times piece barely mentions the single biggest reason for price increases over the past year: Greedflation. This passage, toward the end of the piece, hints at the issue: “On the campaign trail, Vice President Kamala Harris, the Democratic presidential nominee, has acknowledged that prices are too high, vowing to take on price gouging on ‘Day 1.’ In recent months, Mr. Biden has accused food and beverage companies of earning excess profits and urged grocery chains to lower costs.”

It is no secret that big corporations have been raising prices higher than costs, and pocketing the record profits that they’ve made from those sales. The Federal Trade Commission outright stated that point in a report earlier this year: “Census data indicates that one measure of annual profits for food and beverage retailers — the amount of money companies make over and above their total costs — rose substantially during the pandemic and remain quite elevated.”

We can’t have a real conversation about high grocery prices until we acknowledge that the lion’s share of the higher prices Americans are paying right now are a result of price-gouging, and that the American people are unwillingly subsidizing record corporate profits.

It’s particularly fitting that this week’s inflation report was released on the same day that a much smaller headline was buried in business sections of American news sites. “Mars, the closely held maker of Snickers and M&M’s, on Wednesday announced an agreement to buy snack maker Kellanova for $35.9 billion,” reports Axios’s Dan Primack. “This would be the largest corporate merger announced in 2024, topping Discover Financial’s $35.3 billion deal for Capital One.”

Mars is the corporation best-known for candies including Snickers, M&Ms, and and Skittles. Kellanova is a new company that was spun out of Kellogg last year, and its highest-profile snacks include Cheez-Its and Pringles. The consolidation of these two companies would create one of the biggest food manufacturers in the United States, and that merger would undoubtedly lead to higher prices for American consumers.

How Are Workers Doing?

Courtenay Brown at Axios reports that there are several signs that last month’s worse-than-expected jobs report might be an outlier. For one thing, “While the number of unemployed Americans rose by 352,000 last month, the overwhelming share — about 70% — were laid off temporarily, suggesting an imminent return to work.”

How can that be?

“Economists point to Hurricane Beryl, which hit Texas in the week the government surveyed workers for the report, as a factor that upped temporary layoffs,” Brown explains. “Roughly 430,000 people last month reported not being at work because of bad weather — about 10 times higher than the average July reading, going back to 1976, according to Bank of America.”

And at the same time, a number of unemployed Americans who previously had given up trying to find work re-entered the workforce last month. “While roughly 67,000 people became employed last month, a far larger number (about 420,000) joined the workforce but didn’t necessarily find jobs,” Brown writes.

Experts disagree about the impact of weather refugees on last month’s unemployment report, and others claim that even if some Americans lost their jobs due to the hurricane, it’s unlikely that they’ll be back on the job in time to be counted in next month’s report. This is a situation that only time will be able to resolve — but it’s definitely an interesting reminder that the jobs report is full of mysteries that even the experts can’t untangle.

While we always keep a close watch on the unemployment data, it’s also important to make sure that those workers’ paychecks are growing. And in that respect, we may be heading in the wrong direction: A new report from the Washington Center for Equitable Growth rings alarm bells over slowing wage growth.

The Center reports that inflation is declining and worker productivity is rising, which is an environment that should, if you believe your Econ 101 classes, result in increased worker wages. But wage growth is actually slowing at a fairly steady clip, as you can see in the red line above. Compare that to the below chart of corporate profits, which are speeding up about as quickly as wages are slowing down.

Now that the economic volatility of pandemic-era lockdowns are receding into the past, it’s clearer than ever that our policies must focus on increasing the paychecks of working Americans. We’ll likely have more to say about this next week, after Vice President Harris unveils her economic agenda in a speech on Friday.

This Week in Middle Out

• Just this morning, the White House announced that a new law allowing Medicare to negotiate drug prices with Big Pharma “will knock hundreds of dollars — in some cases thousands — off the list prices of 10 of Medicare’s most popular and costliest drugs,” saving Medicare some $6 billion every year.
• “The Consumer Financial Protection Bureau released an advisory opinion that put sellers on notice that it would not tolerate the predatory practices that have come to dominate the so-called contract for deed market,” writes Matthew Goldstein at the New York Times. “These seller-backed sales have become popular in poor neighborhoods with rundown single-family homes, where mortgages are hard to come by.”
• In a wonky legal deep-dive, The American Prospect makes a case for reviving an obscure 1936 antitrust law to combat our current wave of monopoly and monopsony price-gouging.
• Last week, I made the case that broadly popular policies which benefit the majority of Americans are true centrist policies. This week, Data for Progress released the results of a poll that surveyed voters in Michigan, Georgia, Pennsylvania, Nevada, Wisconsin, and Arizona about a wide range of policies. Below, you can see that ideas like expanding Medicare to cover dental, vision, and hearing; cutting prescription drug costs; taxing the rich; and restoring the Child Tax Credit enjoy a broad swath of support. Capping rent increases is supported by 75 percent of voters, with 53 percent strongly supporting the idea. These aren’t “progressive” or “far-left” ideas — these are policies that most working Americans support, regardless of party.

This Week on the Pitchfork Economics Podcast

Michael Graetz, author of The Power to Destroy: How the Anti-Tax Movement Hijacked America, joins Nick and Goldy to talk about how some radical trickle-downers managed to turn the American anti-tax movement into one of the biggest creators of wealth for the super-wealthy at the top of the economy. This episode turns into a fascinating, broader conversation about taxes, including what a truly equitable and sustainable federal tax code might look like.

Closing Thoughts

On Monday, the Biden Administration announced the “Time Is Money” initiative, which packages together a number of executive actions, regulations, and policies “to crack down on all the ways that corporations — through excessive paperwork, hold times, and general aggravation — add unnecessary headaches and hassles to people’s days and degrade their quality of life.”

“Time Is Money” is the next logical step after the Biden Administration’s ongoing fight against the out-of-control junk fees levied by banks, airlines, and other large corporations. Rather than going directly after those surprise additional charges that get slapped onto bills at the last minute, this initiative targets the many ways that corporations use to waste our time.

“Americans know these practices well,” the White House wrote, “it’s being forced to wait on hold just to get the refund we’re owed; the hoops and hurdles to cancel a gym membership or subscription; the unnecessary complications of dealing with health insurance companies; the requirements to do in-person or by mail what could easily be done with a couple of clicks online; and confusing, lengthy, or manipulative forms that take unnecessary time and effort.”

The initiative includes a new regulation that says unsubscribing from an app or membership service should be just as easy for consumers as it was to subscribe. Rather than making people call customer service lines only to be put on hold for long stretches of time, new regulations will require corporations to allow people to unsubscribe with a single click.

Along the same lines, some health insurers still require people to physically mail in claims or to call a certain number during inconvenient times. The Biden Departments of Labor and Health and Human Services are teaming up to require insurers to provide easy and efficient online portals on which people can file claims and ask questions.

There are more regulations in the package, to end the practice of forcing customers to navigate a complex web of phone-tree options in order to reach customer service, and to punish businesses that use fake and fraudulent reviews to drum up business.

We’ve all had occasions where we’re forced to participate in a convoluted bureaucracy to get a refund, or to stop paying an unwanted recurring fee, or to get insurance coverage for an expensive medical procedure. Anyone who ever tried to cancel their cable subscription knows the dirty tricks that businesses will use to waste your time and to discourage you from getting what you want. These businesses transform your wasted time into their profit.

The stroke of genius in this package of regulations is the name — it correctly identifies the cost of these practices on consumers. These time-wasting tricks often require people to take time off work because call centers are only open Monday through Friday during normal business hours. They drain your free time and eat up precious hours that could be spent doing literally anything else.

Just as raising the overtime threshold protects the time of American workers by ensuring that employers have to pay time-and-a-half for every hour worked over 40 in a week, the “Time Is Money” initiative affirms the importance of both the time and paychecks of American workers, adding another dimension to the middle-out economic principle of growing the wealth of the middle class. If your paychecks are growing but your free time is consumed with jumping through hoops in order to preserve the profit of greedy corporations, that’s a net negative for the economy. The economy does better when worker’s paychecks grow — and when workers have the time to enjoy the economy they’re building.

Be kind. Be brave. Take good care of yourself and your loved ones.

Zach